On appeal from the Union County Court of Common Pleas.
For the appellant, Koestler & Koestler (Melvin J. Koestler, of counsel).
For the respondent, Vincent D. Manahan, Jr.
Before Case, Chief Justice, and Justices Heher and Colie.
The opinion of the court was delivered by
HEHER, J. The question here is whether one who procures a policy of insurance upon his own life, and pays the premiums thereon, may, without the consent of the beneficiary, whose appointment as such is revocable, receive "loans" from the insurer under a provision of the policy obliging the insurer, at any time after three full years' premiums have been paid and while the policy is in force, "on proper and lawful assignment and delivery" of the policy, to "loan on the sole security thereof up to the limit secured by the cash surrender value."
The defendant insurer issued to the late Judge Abe J. David three policies of insurance upon his life: the first on
May 22d, 1912, in the sum of $5,000; the second on November 24th, 1919, in the sum of $10,000; and the third on June 27th, 1921, in the sum of $6,000. His wife, the plaintiff herein, was designated as the beneficiary of all three policies; but the insured reserved the absolute power of revocation and the right to designate a new beneficiary, with or without a reservation of the right of revocation. All payments of premiums upon the policies were made by the insured; and he had exclusive possession of the policies at all times. There was neither a change of beneficiary nor a revocation of the appointments thus made. The insurer made a series of "loans" to the insured upon each of the policies; and in each instance the insured executed an assignment to the insurer of "all right, title and interest in" the particular policy, "together with all money that may become payable thereunder, as sole security for" the loan, so termed, which bore interest at the rate prescribed by the policy, and stipulated for the avoidance of the policy in the event that the principal of the loan and the accrued interest should equal the policy's cash surrender value. On January 25th, 1940, on the application of the insured, the face amount of the second policy was reduced from $10,000 to $5,000, and credit was given accordingly on an outstanding "loan" made thereunder. Eventually, each policy lapsed for non-payment of a matured premium: the first above mentioned on May 22d, 1939; the second on November 24th, 1940; and the third on June 27th, 1938. The first and second policies were continued as paid-up insurance for $326 and $244, respectively; but the unpaid loan on the third policy equalled its cash surrender value, and so it was deemed valueless. The insured died on November 21st, 1942; and it is conceded that the beneficiary not only did not consent either to the making of the loans in question or to the reduction of the amount of the one policy, but had no knowledge of any of those transactions until after the insured's death.
The beneficiary sued for the face amount of the three policies; and Judge McGrath, sitting in the Pleas without a jury, by consent, rendered judgment for plaintiff for what the defendant insurer contends is the paid-up insurance
value of the first and second policies, and for defendant on the third policy.
The point made by the beneficiary, in brief, is that as such she had a "vested property right" in the policies which was subject to divestment "only in the manner provided by the policy contract;" that the assignments made by the insured to the insurer served only to transfer the insured's interest in the policies, i.e., the insured's right to the proceeds of the policies if he survived the beneficiary, and therefore the beneficiary is not bound by the insured's assignments of the policies to secure the loans made thereon -- citing ...